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This article measures inequality in India using the Theil index, which has not been done before now. This index allows the authors to distinguish between within-group and between-group inequality levels. Using the expenditure data from surveys conducted in 1987–88, 1993–94, 1999–2000, and 2004–5, they show that inequality between states and between urban and rural areas is dwarfed by the inequality across households within these aggregates. The within-group inequality accounts for well over 80 percent of overall inequality and persists in this magnitude throughout the period of this study....

This article measures inequality in India using the Theil index, which has not been done before now. This index allows the authors to distinguish between within-group and between-group inequality levels. Using the expenditure data from surveys conducted in 1987–88, 1993–94, 1999–2000, and 2004–5, they show that inequality between states and between urban and rural areas is dwarfed by the inequality across households within these aggregates. The within-group inequality accounts for well over 80 percent of overall inequality and persists in this magnitude throughout the period of this study. The authors find that the overall inequality shows only modest variation over the period, rising slightly between 1987–88 and 1993–94 and again between 1993–94 and 1999–2000, but falling by 2004–5 to roughly the 1987–88 level. The authors also find that inequality has fallen in most states and within rural and urban areas in most states between 1987–88 and 2004–5. Finally, they find no correlation between the change in inequality across households within states and the change in state-level measures of tariff and nontariff protection.